Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several electronic devices on which he had secured patents. Although the company has been fairly profitable, it is now experiencing a severe cash shortage. For this reason, it is requesting a $610,000 long-term loan from Gulfport State Bank, $155,000 of which will be used to bolster the Cash account and $455,000 of which will be used to modernize equipment. The companys financial statements for the two most recent years follow:

Sabin Electronics
Comparative Balance Sheet
	This Year		Last Year
Assets
Current assets:
Cash	$	114,000	$	260,000
Marketable securities		0		29,000
Accounts receivable, net		620,000		410,000
Inventory		1,055,000		705,000
Prepaid expenses		30,000		33,000
Total current assets		1,819,000		1,437,000
Plant and equipment, net		1,977,800		1,480,000
Total assets	$	3,796,800	$	2,917,000
Liabilities and Stockholders Equity
Liabilities:
Current liabilities	$	855,000	$	410,000
Bonds payable, 12%		800,000		800,000
Total liabilities		1,655,000		1,210,000
Stockholders' equity:
Common stock, $15 par		600,000		600,000
Retained earnings		1,541,800		1,107,000
Total stockholders equity		2,141,800		1,707,000
Total liabilities and equity	$	3,796,800	$	2,917,000

Sabin Electronics
Comparative Income Statement and Reconciliation
	This Year		Last Year
Sales	$	5,550,000	$	4,680,000
Cost of goods sold		3,985,000		3,560,000
Gross margin		1,565,000		1,120,000
Selling and administrative expenses		675,000		570,000
Net operating income		890,000		550,000
Interest expense		96,000		96,000
Net income before taxes		794,000		454,000
Income taxes (30%)		238,200		136,200
Net income		555,800		317,800
Common dividends		121,000		100,000
Net income retained		434,800		217,800
Beginning retained earnings		1,107,000		889,200
Ending retained earnings	$	1,541,800	$	1,107,000

During the past year, the company introduced several new product lines and raised the selling prices on a number of old product lines in order to improve its profit margin. The company also hired a new sales manager, who has expanded sales into several new territories. Sales terms are 3/10, n/30. All sales are on account.

Required:

1.	To assist in approaching the bank about the loan, Paul has asked you to compute the following ratios for both this year and last year:

a.	The amount of working capital.

This Year Last Year

Working capital:

b.	The current ratio. (Round your answers to 2 decimal places.)

This Year Last Year

Current ratio:

c.	The acid-test ratio. (Round your answers to 2 decimal places.)

This Year Last Year

Acid-test ratio:

d.	The average collection period. (The accounts receivable at the beginning of last year totaled $360,000.) (Round your intermediate calculations and final answers to 1 decimal place. Use 365 days in a year.)

This Year Last Year

Average collection period days days

e.	The average sale period. (The inventory at the beginning of last year totaled $610,000.) (Round your intermediate calculations and final answers to 1 decimal place. Use 365 days in a year.)

This Year Last Year

Average sale period: days days

f.	The operating cycle. (Round your intermediate calculations and final answer to 1 decimal place.)

This Year Last Year

Operating cycle: days days

g.	The total asset turnover. (The total assets at the beginning of last year were $2,890,000.) (Round your answers to 2 decimal places.)

This Year Last Year

Total asset turnover:

h.	The debt-to-equity ratio. (Round your answers to 3 decimal places.)

This Year Last Year

Debt-to-equity ratio:

i.	The times interest earned ratio. (Round your answers to 1 decimal place.)

This Year Last Year

Times interest earned ratio:

j.	The equity multiplier. (The total stockholders equity at the beginning of last year totaled $1,697,000.) (Round your answers to 2 decimal places.)

This Year Last Year

Equity multiplier:

2. For both this year and last year: a. Present the balance sheet in common-size format. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) Sabin Electronics Common-Size Balance Sheets This Year Last Year Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities Bonds payable, 12% Total liabilities Stockholders' equity: Common stock, $15 par Retained earnings Total stockholders' equity Total liabilities and equity